Mr Greetham said the combination of a slowdown in China, similar to Japan 20 years ago, normalisation of ultra-loose monetary policy in the United States, emerging market stress and likely falling commodity prices had striking parallels to the world economic cycle two decades ago.

“I see that same situation, where China is going ex-growth, excess ­capacity commodity production built ­up during the boom and emerging ­market stress with more scary episodes to come," Mr Greetham said in ­an interview with The Australian Financial Review.

London-based Mr Greetham, who oversees $US15 billion in institutional and retail funds, is bullish on equities in the US and Japan, believing they will benefit from low global inflation and a strengthening of the US dollar.

However, he warned of more ­challenging times for Australia, saying he was “underweight commodities quite substantially".

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“I do think there will be a more difficult period for Australia as money flows back into America and commodity prices weaken," Mr Greetham said.

“The economy’s commodity-sensitivity and close ties to China are going to be headwinds."

Australian shareholder

Fidelity is one of the world’s biggest fund managers and is a shareholder in several Australian companies ­including Sydney Airport, Ramsay Health Care, OzForex, Dick Smith and ­Kathmandu.

Mr Greetham manages several Fidelity World Wide Investments multi-asset funds, accounting for $US12 billion of institutional investor funds and $US3 billion in retail money. His holdings are independent of some other Fidelity investments.

The British fund manager uses a so-called “investment clock" to analyse global growth and global inflation pressures to make investment decisions.

Against a backdrop of a slowdown in minerals-hungry China, excess labour market capacity in the developed economies of the US and Europe, falling global inflation and the US Federal Reserve gradually unwinding its extraordinary stimulus, he is counting on a continuation of last year’s 30 per cent surge in the US S&P500 Index.

“The asset class that does best when global growth is above trend and ­inflation is falling is equities," he said from London.

“I like equities in the US, United Kingdom and Japan."

“The Fed is eventually going to raise interest rates, so that makes you bearish about government bonds, nervous about global REITs and commodities."

Following last week’s weakness in US employment and manufacturing data, some economists believe the US economic recovery has lost momentum, reflected in a 7 per cent fall in the Dow Jones Industrial Average since the start of the year.

However, Mr Greetham is more upbeat, arguing the US economic statistics had been distorted by the severe cold weather snap during winter. He is taking the opportunity to rotate out of commodities and into equities.

“I think it’s a weather phenomenon," he said.

“So I’m selling the commodities and buying the stocks."

Natural gas prices have jumped to above $US5 per BMU (British Thermal Unit) for the first time since 2010, compared to a little more than $US3 three months ago. Crude oil has also risen above $US100 for the first time this year.

Fidelity’s analysis shows that the US sharemarket has delivered an average return of 20 per cent since 1973 in times of a low global inflation economic recovery.

That scenario spells trouble for emerging markets, but the outlook is positive for Japan in Mr Greetham’s view.

Japanese upside

Japan’s stock index has slumped about 14 per cent this year, entering official correction territory, as investors become worried about the ability of policy­makers to grow the economy­ ­sustainably. The Japanese Nikkei surged 57 per cent last year in response to unprecedented fiscal and monetary stimulus to try and arrest its two ­decades of stagnation.

Mr Greetham is betting on the ­Japanese government and central bank continuing its aggressive pro-growth policies.

“It you want a leveraged play on the global recovery, it’s Japan," he said.

Also, Japan’s car makers have the benefit of selling vehicles in US dollars, and benefiting from cheaper commodities used to make the vehicles, he said.

The outlook for emerging markets is negative.

Emerging markets such as Turkey, Brazil, India, Indonesia and South Africa are grappling with capital outflows, as investors repatriate money back to the US as a result of the Federal Reserve unwinding its $US4 trillion bond-buying program.

Investors previously ploughed money into the emerging economies in search of yield as a result of ultra-low interest rates in the developed world, but have now realised the economies have significant economic and political problems.

Turkey and Brazil have been forced to increase interest rates and devalue their currencies in an attempt to try and stem the financial pressure.

“Tapering is starting to show negative side effects in the emerging ­markets," Mr Greetham said.

He likened the emerging market stress to the experience of Japan, ­Russia, south east Asia and Mexico in the 1990s.